STOCK prices were down sharply after a highly volatile trading session on Tuesday on worries of rupee depreciation and selling of shares by foreign investors.

The equity market opened firm with the BSE Sensex moving up by more than 100 points in the first 30 minutes of trading, but the falling rupee pulled down most of the gains.

The rupee closed at an 11-month low of 45.16.

After breaching the psychological level of 45 on Monday, the domestic currency continued to decline on Tuesday. It touched an 11-month low against the dollar to end at 45.16/17 almost 30 paise lower than Monday's close of 44.87/88.

The rupee opened lower at 44.94/96 and touched an intra-day low of 45.22/23. This level was last seen in November 2004, said dealers.

The rupee's decline was attributed to the outflow of FII funds and the strengthening of the dollar against other currencies. The dollar also touched a two-year high against the yen. The yen crossed the 115 levels and touched a low of 115.90 against the dollar.

Major selling on the bourses came in the last 45 minutes of trading, and this created panic in the market. At close, the BSE Sensex was down 80.37 points (0.98 per cent) at 8122.25.

The NSE's S&P CNX Nifty was down 16.95 points (0.68 per cent) to close at 2,464.20.

Brokers said selling in the market on Tuesday was from hedge funds as they have started withdrawing funds from across the Asian markets. This is due to the firming of the dollar against various international currencies.

In the domestic market, the FIIs continued to remain net sellers this week too. On Monday, they were net sellers to the tune of Rs 299.10 crore in equity. However, mutual funds inflows continued to remain positive, and they bought equity valued at Rs 237.41 crore on Monday.

The major losers in the Sensex stocks include Ranbaxy Laboratories, Satyam Computers, Dr Reddy's Laboratories and Tata Steel.

Brokers said the next level for the Sensex on the lower side would be 8,050, and if it falls below this level, the index can fall below 8,000.

At close, the overall mood of the market remained pessimistic and dealers expect more selling in the next few days.

(This article was published in the Business Line print edition dated October 19, 2005)

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